Investment Thesis
Roku maintains exceptional financial health with a debt-free balance sheet, $1.6B cash reserves, and strong free cash flow generation of $196M (15.7% margin), supported by solid 15.2% revenue growth. However, operating margins remain critically thin at 4.1% despite healthy 45.2% gross margins, resulting in poor returns on equity (3.2%) and assets (2.0%), indicating the company struggles with capital efficiency and operational leverage despite revenue scale.
Strengths
- Debt-free balance sheet with zero long-term debt and 0.00x debt-to-equity ratio provides significant financial flexibility
- Exceptional free cash flow generation of $196M with minimal $3.1M CapEx requirements and 2.91x current ratio shows strong liquidity
- Revenue growth of 15.2% YoY with 166.3% diluted EPS growth demonstrates top-line momentum and earnings leverage
Risks
- Operating margin of 4.1% is critically thin relative to 45.2% gross margin, indicating high operating expenses consume most profitability
- ROE of 3.2% and ROA of 2.0% demonstrate severely inefficient capital deployment despite $4.4B in total assets
- Operational leverage is poor despite $1.2B revenue scale, suggesting business model faces structural cost pressures or limited pricing power
Key Metrics to Watch
- Operating margin expansion trajectory - critical to improving shareholder returns
- Operating expense ratio trend - need clarity on whether company can control SG&A and R&D as percentage of revenue
- Free cash flow sustainability and conversion rate - validates whether strong FCF continues as business scales
Financial Metrics
Revenue
1.2B
Net Income
85.7M
EPS (Diluted)
$0.57
Free Cash Flow
196.0M
Total Assets
4.4B
Cash
1.6B
Profitability Ratios
Gross Margin
45.2%
Operating Margin
4.1%
Net Margin
6.9%
ROE
3.2%
ROA
2.0%
FCF Margin
15.7%
Balance Sheet & Liquidity
Current Ratio
2.91x
Quick Ratio
2.82x
Debt/Equity
0.00x
Debt/Assets
38.6%
Interest Coverage
120.12x
Long-term Debt
0.0
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T18:47:07.550256 |
Data as of: 2026-03-31 |
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